South African bonds were flat in early morning trade on Wednesday as investors wait for the inflation data due later in the morning.
"We are not seeing much on the market this morning, and markets will remain on the sidelines ahead of 11:30," a bond trader said.
By 08:53 the short-term government R153 bond was at 9.920% from its previous close of 9.910%. The medium-term R157 was at 9.280% from 9.285% at the previous close. The long-term R186 was bid at 9.040% from its previous close of 9.035%.
The rand was last bid at 7.7817 per US dollar from its overnight close of 7.8025.
"The currency is also not doing much and we won’t be seeing volumes in the market until the data is released," added the trader.
Today’s CPIX data is the key event for the market as it will provide direction on interest rates and whether inflation expectations need to worsen or not before getting better.
Consumer inflation excluding interest on mortgage bonds (CPIX) - the measure used by the South African Reserve Bank (SARB) for its inflation target - is expected to have increased at 12.9% year-on-year (y/y) in July from the all-time high of 11.6% registered in June, an I-Net Bridge survey has found.
This will be the sixteenth month running that CPIX has been above the 6% upper target limit, and will be well above the 6.5% seen a year ago.
The previous all-time high for CPIX was the 11.3% set in 2002.
Forecasts among the eleven leading economists surveyed ranged from 11.2% to 13.5%, but ten of the eleven see it above last month’s level.
Statistics South Africa will release the data at 11:30 today.
Headline inflation - the percentage change in the consumer price index (CPI) - is expected to have increased at a whopping 13.6% from a previous 12.2%; and from just 7% a year ago.
Forecasts for CPI ranged from 12.1% to 14.1%. Only one respondent saw a dip below last month’s level.
The 27.5% increase in electricity prices was expected to generally take effect from July, while higher petrol prices in July are seen as contributing to the large rise in consumer inflation, but the good news is many analysts now believe the inflation peak is nigh.
Further upside pressure in producer prices is expected when the data is released on Thursday.
Foreigners were net sellers of 501.564 million rand worth of South African bonds on Tuesday after net sales of 59.378 million rand worth of local bonds on Monday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was 134.521 billion rand on Tuesday from 32.571 billion rand on Monday. |
